THE NEW YORKER, MAY 18, 2015
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superpower, hyper-accelerating someone
into a fully functional C.E.O. in five
years."
The firm's fourteen-person deal team
also enables it to rapidly assess any new
technology, making a16z a kind of Iron
Man suit for Andreessen as he pursues
his flights of fancy. Jim Breyer, who led
Facebook's first venture round at Accel
Partners, told me, "I spend most of my
time trying to connect the dots for what
the future will look like in five to seven
years, but I don't believe I scale as well
as Marc and Ben and their team.They've
moved into next-gen agricultural prod-
ucts and wearables and drone software,
where a lot of us don't have expertise
or networks."
Andreessen and Horowitz launched
the firm in 2009, when venture invest-
ment was frozen by the recession. Their
strategy was shaped by their friend Andy
Rachle , a former V.C. He told them
that he'd run the numbers and that fif-
teen technology companies a year reach
a hundred million dollars in annual rev-
enue---and they account for ninety-eight
per cent of the market capitalization of
companies that go public. So a16z had
to get those fifteen companies to pitch
them. "Deal flow is everything, " An-
dreessen told me. "If you're in a second-
tier firm, you never get a chance at that
great company." A leading investment
banker who has taken numerous soft-
ware companies public told me, "I put
ninety per cent of my e ort into seek-
ing out deals from the top eight venture
firms, ten per cent into the next twelve,
and zero per cent into all the rest."
The dirty secret of the trade is that
the bottom three-quarters of venture firms
didn't beat the Nasdaq for the past five
years. In a stinging 2012 report, the L.P.
Diane Mulcahy calculated, "Since 1997,
less cash has been returned to V.C. inves-
tors than they have invested." The truth
is that most V.C.s subsist entirely on fees,
which they compound by raising a new
fund every three years. Returns are kept
hidden by nondisclosure agreements, and
so V.C.s routinely overstate them, both
to encourage investment and to attract
entrepreneurs. "You can't find a venture
fund anywhere that's not in the top quar-
tile," one L.P. said sardonically. V.C.s also
logo shop, buying into late rounds of hot
companies at high prices so they can list
them on their portfolio page.
When a16z began, it didn't have even
an ersatz track record to promote. So
Andreessen and Horowitz consulted on
tactics with their friend Michael Ovitz,
who co-founded the Hollywood talent
agency Creative Artists Agency, in 1974.
Ovitz told me that he'd advised them to
distinguish themselves by treating the
entrepreneur as a client: "Take the long
view of your platform, rather than a trans-
actional one. Call everyone a partner,
o er services the others don't, and help
people who aren't your clients. Disrupt
to di erentiate by becoming a dream-
execution machine."
Believing that founders make the
best C.E.O.s---look at Intel, Apple, Or-
acle, Google, Facebook---Andreessen
and Horowitz recruited only general
partners who'd been founders or run
companies.Then they began construct-
ing the illusion of authority, taking o ces
on Sand Hill Road and filling them
with paintings by Robert Rauschenberg
and Sol LeWitt---another page from
the book of Ovitz, who commissioned
a Roy Lichtenstein painting for C.A.A.'s
lobby that was so large the firm had
to leave it behind when it moved. They
were studiously punctual (partners are
fined ten dollars for each minute they're
late to a pitch), used glassware rather
than plastic, and said no quickly and
explained why (unless the reason was
doubts about the entrepreneur) in a
handwritten note. And, while most V.C.s
were publicity averse---Sequoia's slogan
was "The entrepreneurs behind the en-
trepreneurs"---a16z banged the drum to
draw startups. The tech publicist Margit
"How many times do I have to tell you to stay inside the bowl?"
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